GUPTA TRADING CO Vs. DELHI ADMINISTRATION

JUDGEMENT

(1.) THE controversy raised in this writ petition is whether a dealer who has got himself registered under the Delhi Sales Tax Act, 1975, and had been issued forms ST-1 for effecting purchases without the payment of sales tax can be deprived of his unqualified right to obtain further such forms on the allegations that certain irregularities had been found in the sales which the dealer committed, though they are denied by the dealer and are subject-matter of appeals ?

(2.) THE brief background is that the petitioner-firm got itself registered under the Delhi Sales Tax Act, w. e. f. 21st September, 1978. THE Sales Tax Officer was then satisfied that the firm had effected purchases of Rs. 1,547 up to that date, and had sold goods worth Rs. 1,054. THE dealer had then filed surety for Rs. 10,000 each under the local and Central Acts from another registered dealer in order to secure the revenue (sic ). A number of ST-1 forms were then obtained by the petitioner from the sales tax department, and they enabled it to effect purchases without the payment of sales tax. To the extent, the purchases were so effected, there is no controversy. However, for the assessment year 1980-81, the sales tax authorities noticed a number of irregularities in the purported sales effected by the petitioner. A raid had also been organised at its premises, and some documents seized and impounded on 28th March, 1984. THE assessment proceedings revealed that the petitioner had effected large sales to a number of other dealers on obtaining ST-1 forms from them which entitled them to effect purchases without the payment of sales tax. However, enquiries from those dealers as well as the scrutiny of these ST-1 forms revealed that either those dealers had not purchased the goods from the petitioner, or the purchases effected were of small amounts which had been converted into far larger amounts going up to lacs in those forms. Thus the concern Chaudhary Sales Corporation to whom the petitioner claimed to have sold goods worth Rs. 4,43,107. 75 denied that any such purchases were effected. Another concern Bhagwati Trading Company stated that goods worth Rs. 1,390. 80 were purchased from M/s. Deluxe Motors, and the ST-1 form issued to the latter had been converted by the petitioner in its favour of sales worth Rs. 2,65,193. THE petitioner had further shown sales worth Rs. 4,67,224 to M/s. Raj Automobiles (P.) Ltd. , while the registration of that concern had already been cancelled. Again M/s. Durga Enterprises claimed to have effected purchases of goods worth Rs. 21,519 from M/s. Shyam Bros. , but the ST-1 form thereof had been converted by the petitioner in its favour for Rs. 6,77,208. THEre were some other instances mentioned in the order of the Sales Tax Officer, and he, therefore, proceeded to frame the assessment on best judgment basis, and enhanced the sales by rupees one lac per quarter under the local Act, and made the same taxable at the rate of 10 per cent. This was on 28th March, 1985. THE petitioner's appeal against the same is pending.

(3.) WE are not inclined to accept that purchases and sales have to be looked at in isolation and independent watertight compartments. They are integral part of the overall business activity of the dealer. The totally of the business affairs has to be viewed in its overall conspectus. The petitioner in the present case is not a manufacturer. Its entire activity is trading. It has been in the past availing ST-1 forms of enable effecting of purchases free of sales tax. However, in case the authorities are able to lay hand on some material which shows that the purchases so effected, are being disposed of neither to a registered dealer on obtaining ST-1 forms or to a consumer on charging sales tax and further are not shown to be subject-matter of inter-State transactions, can they be obliged to continue issuing ST-1 forms to be petitioner. In other words, can any clandestine disposal of goods to the detriment of sales tax collections be entirely overlooked and no preventive steps to protect the interest of the revenue taken ? As is apparent from the narration of facts above, the petitioner had got itself registered as a dealer on extremely small quantities of sales and purchases. Nominal securities were obtained at the time of registration. The dealer thereafter started having substantial purchases, and sales represented were also quite large. The sales tax authorities, however, found that the purchased goods had not been sold to the dealers from whom purported ST-1 forms were claimed to have been obtained. They were either found forged or interpolated to highly inflated figures shown therein. This course of dealing had tendency to bring out that the goods actually purchased were not being sold to the persons to whom they were represented to be, but otherwise. In this state of affairs when the authorities are permitting the continuance of the registration of the petitioner, they can demand security. This is clearly permissible under section 18 of the Act. Of course, they should have provided an opportunity to the petitioner of being heard before demanding the additional security as done in the present case. However, they have belatedly issued show cause notice, and the petitioner must be heard on the same. The right to demand security under section 18 for continuance of registration certificate is clearly there.